Cory v. Leasure

Filing 19

MEMORANDUM OPINION AND ORDER by Judge Greg N. Stivers. IT IS HEREBY ORDERED that Appellee's Motion to Dismiss (DN 7 ) is GRANTED, and Appellee's Motion for Judicial Notice and Supplementation of Record on Appeal (DN 12 ) is DENIED AS MOOT. cc: Counsel, Roger Cory, pro se(JWM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CASE NO. 1:15-CV-00001-GNS
DR. ROGER L. CORY

APPELLANT

V.

ROBERT W. LEASURE,
CHAPTER 11 TRUSTEE

APPELLEE

MEMORANDUM OPINION AND ORDER
This matter comes before the Court on Appellee’s Motion to Dismiss Appeal (DN 7) and
Motion Seeking Judicial Notice and Supplementation of the Record on Appeal (DN 12).
Appellant Dr. Roger L. Cory (“Cory”) has responded to both motions, and the motions are ripe
for a decision. For the reasons outlined below, the motion to dismiss is GRANTED, and the
motion seeking judicial notice and supplementation of the record on appeal is DENIED AS
MOOT.
I.

BACKGROUND AND CLAIMS1

This appeal relates to a contentious bankruptcy proceeding that was pending in the U.S.
Bankruptcy Court for the Western District of Kentucky. Appellee Robert Leasure is the courtappointed Chapter 11 trustee (“Trustee”) for the debtors in the bankruptcy proceedings below:

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An abbreviated view of the underlying bankruptcy actions and the related lawsuit in this Court
is provided below. A more thorough recitation of the underlying actions is set forth in this
Court’s opinion in Cory v. Leasure, 491 B.R. 476 (W.D. Ky. 2013), aff’d, No. 13-5612 (6th Cir.
June. 18, 2014). In addition, there have been other appeals relating to the underlying bankruptcy
actions. See Northcutt v. Leasure, No. 1:13-CV-00025-JHM, 2013 WL 2458709 (W.D. Ky. June
6, 2013); Clearview Energy, LLC v. Mammoth Res. Partners, Inc., 491 B.R. 489 (W.D. Ky.
2013).
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Mammoth Resource Partners, Inc. (“MRP”); Mammoth Field Services, Inc.; and Mammoth
Resources, LLC (collectively “Debtors”). Cory is a shareholder of the Debtors.
On October 2, 2007, a group of fifteen plaintiffs2 (collectively “Bennett Plaintiffs”) filed
a lawsuit in this Court styled Paul Daniel Bennett, et al. v. Mammoth Resources Partners, Inc. et
al., No. 1:07-CV-168-JHM, against the Debtors and eight partnerships managed by MRP.
Bennett Plaintiffs asserted sixteen causes of action including: violations of the Securities Act of
1933; violations of the Securities Exchange Act of 1934; violations of the Kentucky Securities
Act; fraud; breach of fiduciary duty; and breach of contract. Bennett Plaintiffs also alleged that
Cory was a “controlling person” of other defendants under the Securities Act of 1933 and the
Kentucky Securities Act. On September 8, 2010, Debtors filed Chapter 11 bankruptcy petitions
in the Bankruptcy Court.3 On October 28, 2010, this Court transferred the Bennett lawsuit to the
Bankruptcy Court, which docketed the case as an adversary proceeding styled Paul Daniel
Bennett et al. v. Mammoth Resource Partners, Inc., No. 10-1055 (Bankr. W.D. Ky.).
On May 15, 2012, the Trustee initiated an adversary proceeding in which it asserted
various claims against Cory.4 In that action, the Trustee sought to recover various sums due to
MRP from Cory. On May 31, 2013, various parties—including Debtors and Cory—entered into
a settlement agreement (“Settlement Agreement”) resolving all claims relating to the adversary

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The “Bennett Plaintiffs” include: Paul Daniel Bennett; Chris Endersby; Excellent Properties,
LLC; Peniel Enterprises, Inc.; Richard A. Persson; Andrew V. Podray; R&S Ogee Ventures,
LLC; Calvin L. Ryberg; H. Carl Ryberg; Carol Jean Glenn Ryberg; Mark and Christy Siebert;
Jeff Wilson; and 2R Ogee Ventures, LLC.
3
The associated case numbers for each Debtor are as follows: MRP, No. 10-11377; Mammoth
Resource, LLC, No. 10-11380; and Mammoth Field Services, Inc., No. 10-11378. On
September 9, 2010, the Bankruptcy Court consolidated those cases under MRP’s petition for
procedural purposes and joint administration. (In re Mammoth Resource Partners, Inc., No. 1011377 (Bankr. W.D. Ky.), DN 6-7).
4
Leasure v. Cory, No. 12-01020-jal (Bankr. W.D. Ky.).
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proceeding initiated against Cory and others.5 (Appellee’s Mot. to Dismiss Ex., DN 7-2). The
Trustee and Cory disagreed as to whether certain claims initiated against Cory would be
dischargeable in his bankruptcy proceeding. (Appellee’s Mot. to Dismiss Ex.). Under the
Settlement Agreement, Cory voluntarily relinquished certain property rights and interests in
exchange for the Trustee’s release of all further claims against Cory. (Appellee’s Mot. to
Dismiss Ex.). On June 25, 2013, the Bankruptcy Court approved the Settlement Agreement
pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. (DN 7-2).
On November 26, 2014, Cory initiated this appeal to “set aside the Order of the
Bankruptcy Court [Bankruptcy Docket No. 844] and void the settlement release agreement by
showing the Appellant was induced to grant the release by fraud, and/or undue influence.”
(Appellant’s Objection to Mot. to Dismiss Appeal 1).
II.

JURISDICTION

Under 28 U.S.C. § 158(a), this Court has jurisdiction to hear appeals from “final
judgments, orders, and decrees” of the bankruptcy court.” 28 U.S.C. § 158(a).
III.

STANDARD OF REVIEW

On appeal, this Court reviews the bankruptcy court’s findings of fact under the clearly
erroneous standard but applies the de novo standard to any conclusions of law. See In re
Isaacman, 26 F.3d 629, 631 (6th Cir. 1994).

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Subsequently, on August 20, 2012, Cory filed a Chapter 7 bankruptcy petition in the
Bankruptcy Court. See In re Cory, No. 12-11135 (Bankr. W.D. Ky.). On July 29, 2013, the
Bankruptcy Court granted a discharge to Cory under 11 U.S.C. § 727.
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III.
A.

DISCUSSION

Appellee’s Motion to Dismiss
The Trustee seeks to dismiss this appeal on the basis that it is barred by the terms of the

Settlement Agreement signed by Cory and approved by the bankruptcy court. Under the terms
of the Settlement Agreement, it is governed by Kentucky law. (Appellee’s Mot. to Dismiss Ex.,
DN 7-2).
As the Kentucky Supreme Court has noted in analyzing contracts:
As with contracts generally, the courts must look to the language of the release to
determine the parties’ intentions. When no ambiguity exists in the contract, we
look only as far as the four corners of the document to determine that intent. “The
fact that one party may have intended different results, however, is insufficient to
construe a contract at variance with its plain and unambiguous terms.”
Abney v. Nationwide Mut. Ins. Co., 215 S.W.3d 699, 703 (Ky. 2006) (citations omitted). “The
validity and scope of a release is determined by the intent of the parties, which must be gathered
from the terms of the release in light of the particular facts and circumstances.” Liggons v.
House & Assocs. Ins., 3 S.W.3d 363, 364-65 (Ky. App. 1999) (citation omitted).
Paragraph 4 of the Settlement Agreement states as follows:
RELEASE BY CORY. Effective upon the Court’s Approval Cory hereby fully,
finally and forever releases, remises, acquits and forever discharges the Trustee,
his attorneys, consultants and agents, the Debtors and the Partnerships from any
and all claims, known or unknown, which Cory has or may have against them,
including, without limitation, any and all claims arising from, under or with
respect to, any of the matters related in any way to the Mammoth Bankruptcy and
its assets, the Partnerships and their assets, the Cory Bankruptcy and the matters
stipulated to in the Recitals.
(Appellee’s Mot. to Dismiss Ex.). By the express terms of the Settlement Agreement, Cory
clearly and absolutely waived any and all claims against the Trustee. In his response to the
present motion, Cory states that “Appellant filed the instant appeal for the benefit of legal
creditors to the bankruptcy estate and to bring to light what is believed to be criminal activity on
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the part of Robert W. Leasure the appointed trustee in the Mammoth Resource Partners, Inc.
consolidated Chapter 11 bankruptcy case.” (Appellant’s Mem. in Supp. of Objection to Mot. to
Dismiss Appeal 4, DN 9).

Thus, this appeal directly relates to claims that would be

encompassed by the release that Cory signed.
In his objection to the motion, Cory argues that the Settlement Agreement should not be
enforced due to fraud, undue influence, and duress.6 Under Kentucky law, “a release without
duress, fraud, or bad faith, is effective to waive a plaintiff's right to bring a claim, whether
statutory or otherwise.” Humana, Inc. v. Blose, 247 S.W.3d 892, 896 (Ky. 2008) (citation
omitted).
To prove that he was fraudulently induced into executing the Settlement Agreement,
Cory must “establish six elements of fraud by clear and convincing evidence as follows: (a)
material representation (b) which is false (c) known to be false or made recklessly (d) made with
inducement to be acted upon (e) acted in reliance thereon and (f) causing injury.” United Parcel
Serv. Co., v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999) (citation omitted). Cory alleges that the
Trustee engaged in numerous acts of fraud, which occurred prior to the execution of the
Settlement Agreement. (Appellant’s Mem. in Supp. of Objection to Mot. to Dismiss 5-9).
Because those events were unrelated to the execution of the Settlement Agreement, Cory cannot
prove that he was fraudulently induced into executing the agreement. In addition, by executing
the release, Cory waived any such fraud claim by the Trustee predating the Settlement
Agreement.

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Cory does not appear to have challenged the validity of the Settlement Agreement before the
Bankruptcy Court and appears to be raising the challenge for the first time on appeal, which is
not permitted. See MaddenSewell LLP v. Mandel, 498 B.R. 727, 729 (E.D. Tex. 2013)
(“Arguments not raised with the bankruptcy court cannot be pursued in an appeal of a
bankruptcy court’s order.” (citation omitted)).
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The Court is also unpersuaded by Cory’s argument that undue influence or duress
invalidates the Settlement Agreement. Under Kentucky law:
It is well-established that undue influence must be of sufficient force to destroy
the free agency of the grantor and to constrain him to do, against his will, that
which he would otherwise have refused to do. Proof of undue influence must
amount to more than a bare showing that the opportunity for its imposition
existed.
Mays v. Porter, 398 S.W.3d 454, 458 (Ky. App. 2013) (citation omitted). With respect to the
allegations of duress, the Kentucky Court of Appeals has noted:
While [financial] [difficulties] may tend to make one more susceptible to duress,
of themselves they are insufficient to constitute civil duress. For actionable civil
duress to have occurred, there must be “an actual or threatened violation or
restraint on a man’s person, contrary to law, to compel him to enter into a contract
or to discharge one.”
Boatwright v. Walker, 715 S.W.2d 237, 243 (Ky. App. 1986) (citation omitted).
As outlined in his response, the purported undue influence and duress relate to Cory’s
financial difficulties at the time he executed the Settlement Agreement. (Appellant’s Mem. in
Supp. of Objection to Mot. to Dismiss 2, 9-10). Those circumstances, however, are not proof of
any undue influence or duress. Rather, Cory has apparent remorse for executing the release, but
his remorse is not a legal basis for invalidating the Settlement Agreement and his release of any
claims against the Trustee.
For these reasons, Cory has failed to identify any legal basis to invalidate the Settlement
Agreement, which includes the waiver of the claims that Cory is now seeking to pursue in the
present appeal. Accordingly, the Court will grant the motion to dismiss.

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B.

Appellee’s Motion for Judicial Notice and Supplementation of Record on
Appeal

The Trustee has also filed a Motion for Judicial Notice and Supplementation of Record
on Appeal (DN 12). Because the Court is dismissing the appeal, it is unnecessary to address this
motion. Accordingly, this motion is denied as moot.
IV.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that Appellee’s Motion to
Dismiss (DN 7) is GRANTED, and Appellee’s Motion for Judicial Notice and Supplementation
of Record on Appeal (DN 12) is DENIED AS MOOT.

Greg N. Stivers, Judge
United States District Court
July 14, 2015

cc:

counsel of record
Roger Cory, pro se

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